Top Ways Companies Using to Avoid US Tariff

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We are no strangers to the global trade war of which U.S. has been accused of by China. China tends to believe that the imposition of such high tariffs on the global metals like steel and aluminum, the U.S. has started a global trade war.

The new raging war has been a matter of discussion for many economists around the world and the analyzation has been never ending.

While some economists believe that the imposition of the new tariff policy or the new economic policy will be a huge setback to the U.S. economy, the others tend to believe that it will have little or absolutely no effect on the American economy. While the debate goes on and it’s interesting to note that none of the economists tend to believe that the new tariff policy is of any positive effect on the U.S. economy. Which definitely raises the question on is it really worth the trouble or not? While countries like Australia and Argentina are safe from the taxes, Canada imposed the same amount of counter tax on U.S. which came into effect on 1st July, 2018.

The European Union showed retaliation of its own and India certainly doesn’t look much happy either. Although President Donald Trump has claimed various times in the past that he would be happy to see the international markets expand and prosper, but the tariff policy seems to be working on the contrary.

Having to face the rage of President Donald Trump’s new tariff policy, Steve Katz, manager of a plant at United Chemi – Con in Lansing, North Carolina has come up with a major duck to have to face as minimum damage as possible. And before we get started

On another level of debate, it’s important for you to understand what are foreign – trade zones / trade zones.

Trade Zones

Trade Zones are the areas or near the entry ports of U.S. from where the goods go to the Customs and Border Protection Supervision. These Trade Zones are believed to be the area which is generally not considered to be a part of the CBP territory. The U.S. government allows companies to import goods directly into this zone with reduced duties. Although the duties still depend on the type and volume of the product imported, but there’s a relief in the amount of duties applied for sure.

Business managers like Katz believe that it can be a vital tool for many international companies in times like these to get a cut down on the trading cost a little and not have their markets in the U.S. completely ruined.

Although it might seem like a major loophole in the tariff policy but it’s not and it’s rather a way for many companies to avoid heavy duties on export shipments.

Many companies all over America and even outside America with a good supply chain of products in the American markets have been found retaliating on the high tariff rates on different products like solar panels, washing machines, steel and aluminum with the biggest slap of $34 billion in Chinese goods. And not only has the administration mentioned a further imposition of tariffs on $16 billion on Aug 23 but also the President has threatened to tax effectively all the $500 billion in products imported in U.S. from China.

Marianne Rowden, President of the American Association of Exporters and Importers in Washington said, “We haven’t seen anything like this most of our careers. Since the Reagan administration, we’ve had trade liberalisation pretty much uninterrupted, except maybe during the financial crisis.”

Companies like Harley-Davidson Inc. said that they might shift their production outside of U.S. in response to the European retaliation to the President’s tariff on steel and aluminum.

The tariff policy on the brighter side might be a good thing for the long term and might even be able to eradicate unfair trade practices but in the short term it doesn’t seem to be yielding much fruit for the country’s economy.

Companies in the haste of avoiding tariffs are adapting to the idea of using trade zones as a means of mitigation of duties on export products.

Bernie Hart, vice president at Customs Brokerage Livingston International supported the idea of Bonded Warehouses as another option on avoiding or at least delaying the tariffs. In a custom-bonded warehouse firms can store and produce products for upto five years and the duties only apply when the product actually leaves the warehouse for consumption. This according to Hart is a great alternative to trade zones and a good way to avail the short run cost benefits.

Tariff Engineering

Tariff engineering another tactic from the 19th century taking its roots back in the modern era refers to the typical designing of an export product to reclassify it into a lower-duty category product.

Which avoids the heavy duty aspect of it and the product more or less remains the same.

While this seems to be a shortcut right now the companies have to be very careful as not to get caught or rejected at the customs.